One of the ways to reduce GHG emissions is to reduce the energy needed for the same transport activity: so, the energy efficiency of the fleet. The International Maritime Organisation (IMO) has developed regulation to improve the energy efficiency of new ships. This has taken the form of the Energy Efficiency Design Index (EEDI). EEDI was agreed upon in 2011 and applies to all ships built from 2013 onwards. It sets a mandatory minimum design (i.e. technical) energy efficiency improvements level, per capacity mile (e.g. tonne mile), for various ship types and sizes. The mandatory levels of improvement increase with time, in different 5-years phases from 2013 to 2030: they go from 0% (having an EEDI of at least the same level of ships on average between 1999 and 2009) to 30% (having an EEDI at least 30% lower). The choice of technology used to achieve levels is left to the ship’s owner. The EEDI focuses on the ship designing and building phase and will be tightened regularly after review of progress and technological developments. Following the 2018 IMO Initial GHG Strategy, it was decided in 2019 to accelerate the implementation of the third phase of the EEDI (starting from 2022 instead of 2025) and to tighten its requirements for some ship types such as containerships (up to 50% energy efficiency improvement). Moreover, new and existing ships must also have a ship-specific Ship Energy Efficiency Management Plan (SEEMP) on board, which serves as a framework for measuring the actual energy efficiency of the ship in operation and for planning and improving measures to reduce its carbon intensity. Finally, in addition to the EEDI for new ships, the Initial Strategy mentions energy efficiency measures for existing ships as a potential candidate measure in the short term.
In practice the implementation and decarbonisation potential of regulations has been limited: Ship owners do not have the right incentives for choosing high-cost but highly efficient technologies and operational changes, and choose instead low-cost, low-gains designs. The market pushes for design improvements without the need for regulations, which has decreased the marginal advantage of regulated vs. non-regulated scenarios. Efficiency gains could also generate adverse effects, such as increased speeds, which could have negative CO2 mitigation consequences. Regulations for improving energy efficiency of new ships were initially seen as a having a high potential for maritime transport decarbonisation. In 2011, initial studies of future impacts of regulations estimated potential emissions decreases of up to 23% of CO2 emissions of shipping activity by 2030.
More recent estimations, however, put the contribution of regulations at only around 3% of CO2 emissions compared with scenarios without any regulation. The limited impact can be due to a number of reasons. Regulations, in particular EEDI ones, take time to be implemented since they mostly only affect new ships. At the same time, beyond regulatory effects, market incentives have seemingly pushed for fleet improvements quicker than regulations estimated or mandated. By 2016, a substantial share of the new build fleet already complied and over-complied with current and future (2025) design efficiency requirements. Notably, 71% of containerships, 69% of general cargo ships, 26% of tankers and 13% of gas carriers already comply with the 2025 EEDI requirement (i.e. -30% reduction compared to reference line).
Strengthening EEDI and SEEMP regulations could bring about additional emission mitigation gains. Putting in place EEDI a similar energy efficiency index for existing ships could more than double mitigation gains obtained from implementing the regulation exclusively on new ships by 2030, relative to 2013. Likewise, putting in place annual efficiency operational rations in SEEMP could be linked to potential CO2 reductions from 5 to up to 43% by 2030, also compared to 2013.
Enforcing regulations also requires having the human resources to enforce, investigate or prosecute breaches. For ship owners and operators, costs vary according to the type of technology and operational practices adopted. Costs of compliance with phase 0 and 1 of EEDI (increasing ship energy efficiency by at least 10% compared to the reference line) have been seen as marginal: it could be achieved by low-costs decisions, such as hull form design and main engine optimization and this cost can rapidly be offset by reduction in fuel oil consumption/expenses. Costs of compliance with phases 2 and 3 could be higher. Nonetheless, enterprises could also benefit from gains in terms of fuel cost decreases. Finally, the distribution of costs between ship owners and operators for covering technology and operational improvements should also be taken into consideration. When the ship owner has too few opportunities to share investment with charterers this leads to a split incentive: a ship owner may invest the up-front capital to put in energy-efficient technology but not receive the benefits. This is typically a problem for investments with a high payback time, i.e. the wind power and contra rotating propellers.
Overall, energy efficiency gains from new ships brought about by combined EEDI and SEEMP could bring about annual fuel cost savings of around USD 50 billion in 2020, and USD 200 billion by 2030. A recent study from the European Union has found out that regulations can be mutually beneficial: setting operational efficiency standards could bring indirect technologically-related energy efficiency gains of up to 34% compared to 2008 data.
In functional terms, regulations could have negative externalities in terms of CO2 emissions reductions. Efficiency gains could lead to a potential increase of operating speeds in response to the improved technical energy efficiency.
